There is often a perception within business that profit and sustainability are at odds with one another. That for an organisation to become more environmentally and socially responsible, it must make changes to its business model that negatively impact its profit margins.
Mitsubishi Chemical – the largest chemical company in Japan – recently launched an initiative to show this perception can be proved false. As part of its “KAITEKI Management” approach – an original concept coined to help guide how it approaches environmental and social issues – the company began to develop its sustainability strategy in a way that improves ESG conditions across its value chain while simultaneously generating higher revenues.
The company identified three income streams in which these two aims could be achieved:
- Income from recycling (generating approximately 1,176 mil. Yen)
- Energy cost savings (generating approximately 382 mil. Yen, approx. US$ 3.5 mil.)
- Income from resource conservation (generating approximately 306 mil. Yen)
To make progress in each of its three income streams, work needed to be conducted across multiple functions of Mitsubishi Chemical´s business, rather than being isolated in a central sustainability team. The company’s product and supply chain departments were identified as especially important functions for its “KAITEKI Management” approach to succeed.
Product and R&D
The work within Mitsubishi Chemical´s product and R&D functions centres around the use of more sustainable materials. A “carbon cycle” analysis was undertaken to identify sustainable materials that would also positively impact revenue growth. This resulted in the company selecting a number of different material types.
Biodegradable polymers (BioPBS) were found to have some of the highest potential for improved circularity and profitability. Partially made from biobased renewables and recyclable, they are used for applications such as rigid packaging, compostable bags and food packaging, nonwovens, and paper coatings. According to grades and applications, BioPBS passes compostable requirements across multiple regions, including in Europe, the US, and Japan. With demand driven by increasing customer awareness of microplastics – tiny plastic particles that break off from products and spread in the atmosphere – Mitsubishi’s sales of the material have tripled over the last two years.
One of the chief aims of Mitsubishi Chemical´s sustainability programme is to create lighter materials that consume less fuel and therefore reduce CO2 emissions. It terms this its “lighter mobility” strategy. DURABIO – a partially bio-based and durable engineering plastic – was selected by the company’s product department for this reason. With this material, the company has been able to launch more lightweight solutions that reduce CO2 levels and are more profitable to manufacture vehicles.
Nichigo G-Polymer TM
Nichigo G-Polymer TM is a gas barrier material that Mitsubishi identified for improved recycling and circularity. It is being increasingly used in the company’s biodegradable (or compostable) food barrier packaging materials such as coffee capsules. It can also easily be dissolved in water and “washed-away” from multi-layer structures in a recycling process.
While the above three materials have contributed to Mitsubishi Chemical achieving its “KAITEKI Management” goals, other investments were deemed necessary to ensure the business could balance sustainability with profitability. These include:
- Investments in electromobility, adding 50% more capacity to its existing electrolyte production facilities. This is part of its “electrification solutions” strategy.
- Expanding the company’s anode materials business and introducing a new process that leads to longer battery life and improved charging performance.
- Developing artificial photosynthesis to capture CO2 from exhaust gas to produce basic chemicals.
Procurement and supply chain
Focusing on raw materials
Within procurement, the company has set new purchasing criteria around the health, safety, security, environmental performance, and social responsibility of its suppliers. Within its raw materials category in particular, there is a requirement that suppliers support the recycling and proper disposal of Mitsubishi Chemical´s products, thus improving recyclability and overall circularity in its value chain. A survey is sent to these suppliers that covers their recycling capability, as well as a number of other ESG areas. The results are then used to provide feedback to suppliers and engage those in need of improvement.
Trickle-down effect from using sustainable materials
By introducing the more sustainable materials mentioned above into its products – particularly electrolytes, anode materials, and biodegradable polymers – Mitsubishi Chemical has created a trickle-down effect that means sustainability and revenue benefits are also felt upstream in its supply chain. For example, as a result of using DURABIO, the company added a fully integrated material supply chain for Carbon Fiber Reinforced Plastics (or CFRP) to its strategic portfolio. Because these materials generally have a longer lifespan, significant cost savings were made through the procurement of them.
In combining ESG and profitability principles in both its products and its supply chain, Mitsubishi Chemical is starting to see significant growth in the sustainable parts of its business. For example, the company projects a yearly growth rate of 9.1% for materials being used in its “lighter mobility” strategy and 12.2% from “electrification solutions”, making its sustainability projects some of the highest contributors to the company’s revenues.
To ensure it stays on track to achieve its sustainability goals, the company has created two separate funds. Firstly, a platform fund of US$150 million that is being used to expand its existing sustainable businesses; and secondly a frontier fund to develop future projects that contribute to its sustainability targets.
“The chemical industry today has been built by taking things produced in the natural world and, through manufactured processes, using them to create products with added functionality at a low cost and in high volume,” says Masayuki Waga, president and CEO of Mitsubishi Chemical. “While this basic approach will remain the same, going forward, an additional focus on avoiding negative environmental impact will be indispensable.”